SEC SEEKS COMMENT ON THE USE OF DERIVATIVES BY MUTUAL FUNDS

The following is and excerpt from the SEC website: “Securities and Exchange Commission today voted unanimously to seek public comment on a wide range of issues raised by the use of derivatives by mutual funds and other investment companies regulated under the Investment Company Act. The SEC is seeking public input through a concept release, which is a Commission-approved document that poses an idea or ideas to the public to get their views. The Commission will use the comments received in response to this concept release to help determine whether regulatory initiatives or guidance is needed that would continue to protect investors and fulfill the purposes underlying the Investment Company Act. “The derivatives markets have undergone significant changes in recent years, and the Commission is taking this opportunity to seek public comment and ensure that our regulatory approach and interpretations under the Investment Company Act remain current, relevant, and consistent with investor protection,” said SEC Chairman Mary L. Schapiro. The concept release is a continuation of the SEC’s ongoing review of mutual funds’ use of derivatives announced last year. The concept release requests public input on the issues that the SEC staff has been examining for potential ways to improve the regulation of mutual funds’ use of derivatives. Public comments should be received within 60 days from the date of publication in the Federal Register. # # # FACT SHEET Soliciting Public Comment on the Use of Derivatives by Funds Background Investment Companies Investment companies regulated under the Investment Company Act such as mutual funds, ETFs, and closed-end funds play a significant role in the U.S. economy and world financial markets. At the end of 2010, for example, registered investment companies held more than $13.1 trillion in assets and more than 40 percent of all U.S. households owned their shares. Investors in these funds rely on investment advisers as well as boards of directors to manage and oversee the funds. Use of Derivatives Subject to the various safeguards contained in the Investment Company Act as well as SEC rules and guidance, funds are permitted to invest in derivatives. Derivatives, which are a type of financial instrument whose value is derived from another underlying product, include such things as futures, certain options, options on futures, and swaps. A common characteristic of most derivatives, which are among a panoply of investments that a fund may make in managing its portfolio, is that they involve leverage. Recent SEC Activity When the Investment Company Act was enacted in 1940, it did not contemplate funds investing in derivatives as they may do today. Indeed, the use and complexity of derivatives have grown significantly over the past two decades. Over the years, the Commission and its staff have addressed a number of issues raised by the use of derivatives on a case-by-case basis. In March 2010, the SEC announced that the staff had initiated a broad review to evaluate the use of derivatives by funds to determine whether and what additional protection might be necessary under the Investment Company Act: http://www.sec.gov/news/press/2010/2010-45.htm Purpose of the Concept Release To better inform its review, the staff is recommending that the Commission issue a Concept Release to solicit public comment on funds’ use of derivatives and on the current regulatory regime under the Investment Company Act as it applies to funds’ use of derivatives. The Commission would use the comments to help determine whether regulatory initiatives or guidance is needed that would continue to protect investors and fulfill the purposes underlying the Investment Company Act. What Does the Concept Release Ask? The Concept Release asks for information on how different types of funds use various types of derivatives as well as the benefits, risks and costs of using derivatives, among other things. Additionally, it asks for comment on several specific issues under the Investment Company Act implicated by funds’ use of derivatives, such as: Restrictions on Leverage – The Investment Company Act restricts the manner in which, and the extent to which, funds may incur indebtedness and may leverage their portfolios. The Concept Release discusses the treatment of derivatives under these restrictions. The Concept Release asks, among other things, how to measure the amount of leverage that a fund incurs when it invests in a derivative. Fund Portfolio Diversification – The Investment Company Act does not require the portfolios of funds to be diversified, but does require them to disclose in their registration statements whether they are diversified or not. The Act also prohibits a fund from changing its classification from diversified to non-diversified without shareholder approval. The Concept Release asks, among other things, how a fund should value a derivative to determine the percentage of the fund's assets that's invested in a particular company for diversification purposes. Fund Investments in Certain Securities-Related Issuers – The Investment Company Act generally prohibits funds from acquiring any security issued by, or any other interest in, the business of a broker, dealer, underwriter or investment adviser. However, funds that meet certain conditions may acquire some securities issued by companies engaged in such business. The Concept Release asks, among other things, how investing in a derivative issued by a broker-dealer may be different from, or similar to, investing in the broker-dealer's stock or bond. Fund Portfolio Concentration – The Investment Company Act does not prohibit funds from concentrating their investments in a particular industry, but does require funds to disclose their industry concentration policies in their registration statements. It also prohibits funds from deviating from those policies without shareholder approval. The Concept Release asks, among other things, how funds determine the industry or industries to which they may be exposed through a derivative investment. Valuation of Fund Assets – The Investment Company Act specifies how funds must determine the value of their assets. The Concept Release asks, among other things, whether the Commission should issue guidance on how funds should value derivatives in their portfolios. What’s Next? The Concept Release will be published in the Federal Register and commenters will have 60 days from the date of publication to submit their comments."

FEES PUBLIC COMPANIES WILL PAY IN 2012 TO REGISTER SECURITIES

The following is an excerpt from the SEC website: "Fee Rate Advisory #2 for Fiscal Year 2012 Washington, D.C., August 31, 2011 – The Securities and Exchange Commission today announced that in fiscal year 2012 the fees that public companies and other issuers pay to register their securities with the Commission will be set at $114.60 per million dollars. The Commission determined this new rate in accordance with procedures required under the securities laws. Accordingly, the Commission consulted with both the Congressional Budget Office and the Office of Management and Budget regarding the annual adjustment. A copy of the Commission's order, including the calculation methodology, is available at http://www.sec.gov/rules/other/2011/33-9255.pdf. Background The securities laws require the Commission to make annual adjustments to the rates for fees paid under Section 6(b) of the Securities Act of 1933 and Sections 13(e) and 14(g) of the Securities Exchange Act of 1934. The Commission must set rates for the fees paid under Section 6(b) to levels that the Commission projects will generate collections equal to annual statutory target amounts. The statutory target amount for fiscal year 2012 is $425 million. The annual adjustment to the fee rate under Section 6(b) also sets the annual adjustment to the fee rates under Sections 13(e) and 14(g). Under changes made by the Dodd-Frank Act, the annual rate changes for fees paid under Section 6(b) of the Securities Act of 1933 and Sections 13(e) and 14(g) of the Securities Exchange Act of 1934 must take effect on the first day of each fiscal year. Therefore, effective Oct. 1, 2011, the Section 6(b) fee rate applicable to the registration of securities, the Section 13(e) fee rate applicable to the repurchase of securities, and the Section 14(g) fee rates applicable to proxy solicitations and statements in corporate control transactions will decrease from $116.10 per million dollars to $114.60 per million dollars. The Section 6(b) rate is also the rate used to calculate the fees payable with the Annual Notice of Securities Sold Pursuant to Rule 24f-2 under the Investment Company Act of 1940." The Commission will issue further notices as appropriate to keep the public informed of the effective date of the fee rate changes under Section 6(b), Section 13(e) and Section 14(g)."

THE PASTOR AND THE PONZI SCHEME

The following is an excerpt from the CFTC website: “Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today announced that it obtained a federal court consent order imposing more than $2 million in restitution and civil monetary penalties on defendants Jeremiah C. Yancy (a.k.a. Jeremiah C. Glaub) of Atoka, Okla., and his company, Longbranch Group International LLC (a.k.a. Longbranch LLC) (Longbranch) of Houston, Texas. The CFTC charged Yancy and Longbranch with operating a million dollar foreign currency (forex) Ponzi scheme and misappropriating customer funds (see CFTC Press Release 5875-10, August 19, 2010). The consent order, entered by the Honorable Vanessa Gilmore of the U.S. District Court for the Southern District of Texas, requires the defendants jointly and severally to pay $692,000 in restitution and each to pay a $692,000 civil monetary penalty. The order also permanently bars the defendants from engaging in any commodity-related activity, including trading and applying for registration or claiming exemption from registration with the CFTC, and from violating the anti-fraud provisions of the Commodity Exchange Act. The order finds that, from July 2008 to August 2010, Yancy and Longbranch solicited 64 customers, including members of Yancy’s church in Idaho where he was a pastor, to open forex accounts. Defendants told prospective customers that they managed forex trading for non-profit organizations, including churches and orphanages, and solicited customers through various “fund-raising entities” to trade forex through them and to invest in their other financial schemes, according to the order. Defendants made misrepresentations to prospective customers through telephone conference calls set up by the fund-raising entities. Defendants’ misrepresentations were passed along to customers via emails from the entities, the order finds. Additionally, the order finds that Yancy and Longbranch promised customers monthly returns of 20 to 40 percent and told some customers that their principal was guaranteed. Defendants also sent prospective customers account statements showing high returns, telling customers that the statements were for forex accounts purportedly holding up to $10 million traded by the defendants, according to the order. Defendants, however, did not inform customers that the account statements were for demonstration and/or test accounts and did not represent actual trading of any customer funds, the order finds. Additionally, Yancy and Longbranch were running a Ponzi scheme because they told at least one customer that his funds were never actually used to trade forex, but instead went to pay another customer, according to the order. The court found that based on defendants’ misrepresentations, 64 customers opened forex trading accounts funded with a net total of $630,000. The majority of the accounts had net losses of up to 95 percent and, on the whole, the accounts lost $230,000, according to the order. Yancy and Longbranch also commingled at least $330,000 of customer funds with their own funds and deposited those funds into forex trading accounts in their names, the order finds. In total, the defendants misappropriated $462,000 of customer funds, according to the order. The CFTC appreciates the assistance of the State of Idaho Department of Finance, which filed a related action against Yancy and Longbranch.”

FORMER PORTFOLIO MANAGER SETTLES WITH SEC

The following is an excerpt from the SEC website: “The Securities and Exchange Commission today filed a settled civil enforcement action against Anthony Scolaro, a former portfolio manager at the hedge fund investment adviser Diamondback Capital Management, LLC, charging Scolaro with using inside information to trade ahead of the November 29, 2009 announced acquisition of Axcan Pharma Inc. The SEC's complaint also names Diamondback as a relief defendant. In its complaint, the SEC alleges that Arthur Cutillo and Brien Santarlas, two former attorneys with the international law firm of Ropes & Gray LLP, misappropriated from their law firm material, nonpublic information concerning the acquisition of Axcan. As alleged in the complaint, they tipped the inside information, through another attorney, to Zvi Goffer, a proprietary trader at the broker-dealer Schottenfeld Group LLC, in exchange for kickbacks. The SEC alleges that Goffer tipped the inside information to fellow Schottenfeld proprietary trader Franz Tudor, who traded in the securities of Axcan, and tipped the information to his friend Scolaro. The SEC alleges that based on this inside information, Scolaro traded in the securities of Axcan on behalf of a Diamondback hedge fund, resulting in illicit profits for the fund of approximately $1.1 million. To settle the SEC's charges, Scolaro consented to the entry of a final judgment that: (i) permanently enjoins him from violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; and (ii) orders him to pay disgorgement of $125,980, prejudgment interest of $14,420, and a civil penalty of $62,945. Diamondback, as a relief defendant, has consented to a final judgment ordering it to disgorge $962,486 in gains resulting from Scolaro's trades, plus prejudgment interest of $110,246. In addition, Scolaro consented to the entry of an SEC order barring him from association with any investment adviser, broker, dealer, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization. Scolaro previously pled guilty to charges of securities fraud and conspiracy to commit securities fraud in a related criminal case, United States v. Anthony Scolaro, 11-CR-429 (S.D.N.Y.) (WHP), and is awaiting sentencing.”

GEORGIA COMMERCE BANK ACQUIRES BANKING OPERATIONS OF PATRIOT BANK OF GEORGIA

The following is an excerpt from the FDIC website: “Georgia Commerce Bank, Atlanta, Georgia, acquired the banking operations, including all the deposits, of Patriot Bank of Georgia, Cumming, Georgia, and CreekSide Bank, Woodstock, Georgia. The two banks were closed today by the Georgia Department of Banking and Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Georgia Commerce Bank. Patriot Bank of Georgia had one branch, and CreekSide Bank had two branches. Due to the Labor Day holiday, the three branches of the two failed banks will reopen as branches of Georgia Commerce Bank on Tuesday, September 6. Depositors of the two failed banks will automatically become depositors of Georgia Commerce Bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship in order to retain their deposit insurance coverage up to applicable limits. Customers of the two failed banks should continue to use their existing branches until they receive notice from Georgia Commerce Bank that it has completed systems changes to allow other branches of Georgia Commerce Bank to process their accounts as well. This evening and over the weekend, depositors can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual. As of June 30, 2011, Patriot Bank of Georgia had approximately $150.8 million in total assets and $111.2 million in total deposits; and CreekSide Bank had total assets of $102.3 million and total deposits of $96.6 million. In addition to assuming all of the deposits of the two Georgia banks, Georgia Commerce Bank agreed to purchase essentially all of their assets. The FDIC and Georgia Commerce Bank entered into loss-share transactions on the failed banks' assets. The loss-share transaction for Patriot Bank of Georgia covers $136.2 million of its assets, and the loss-share transaction for CreekSide Bank covers $69.2 million of its assets. Georgia Commerce Bank will share in the losses on the asset pools covered under the loss-share agreements. The loss-share transactions are projected to maximize returns on the assets covered by keeping them in the private sector. The transactions also are expected to minimize disruptions for loan customers. The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) for Patriot Bank of Georgia will be $44.4 million and for CreekSide Bank, $27.3 million. Compared to other alternatives, Georgia Commerce Bank's acquisition of the two institutions was the least costly resolution for the FDIC's DIF. The closings are the 69th and 70th FDIC-insured institutions to fail in the nation so far this year and the eighteenth and nineteenth in Georgia. The last FDIC-insured institution closed in the state was First Southern National Bank, Statesboro on August 19, 2011.”

SEC OBTAINS COURT ORDER TO HALT ALLEGED INVESTMENT SCHEME IN THE LIFE SETTLEMENT BUSINESS

The following excerpt is from the SEC website; “Washington, D.C., Sept. 2, 2011 – The Securities and Exchange Commission today announced that it has obtained an emergency court order to halt an alleged $4.5 million investment scheme by a Los Angeles-based company that purports to broker life settlements. The SEC alleges that Daniel C.S. Powell and his company Christian Stanley Inc. have spent the past seven years creating the illusion that it was a legitimate company involved in the life settlement industry. Contrary to what investors were told, Christian Stanley has never purchased or generated any revenue as a result of brokering the sale of a single life settlement, and has barely derived any revenue from any of its purported business ventures. Instead, Powell has simply used the Christian Stanley name as a vehicle to raise at least $4.5 million in an unregistered offering of debenture notes, and spent most of the money for purposes unrelated to its ostensible business operations. Powell misused investor funds to finance his stays at luxury hotels, visits to nightclubs and restaurants, and purchases of high-end vehicles. The Honorable George H. King for the U.S. District Court for the Central District of California yesterday granted the SEC’s request for a temporary restraining order and asset freeze against Powell and his companies. The court appointed Robb Evans & Associates LLC as temporary receiver over the entities. “Powell and Christian Stanley created the façade of an actual business when in reality they have virtually no revenue,” said Rosalind Tyson, Director of the SEC’s Los Angeles Office. “Most of the money raised from investors has been used to finance Powell’s extravagant lifestyle and for other purposes that have not been disclosed to investors.” A life settlement is a transaction in which an individual with a life insurance policy sells that policy to another person, who then assumes responsibility for paying the premiums. Typically, the seller no longer wants the policy or can no longer afford to pay the premiums. In exchange, the insured party typically receives a lump sum payment that exceeds the policy’s cash surrender value, but is less than the expected payout in the event of death. According to the SEC’s complaint, Powell raised funds from at least 50 investors nationwide in the fraudulent debenture offering, promising investors fixed interest returns ranging from 5 to 15.5 percent annually for five-year terms. Powell claimed the notes were backed by assets such as a gold mine in Nevada and a coal mine in Kentucky that he said held coal deposits valued at $11.8 billion. The SEC alleges that instead of using investor money to purchase life settlements or develop the coal and gold mines, Powell and Christian Stanley instead used investors’ money for such unrelated purposes as sales commissions and Ponzi-like payments to existing note holders. Among Powell’s other personal expenditures with investor funds were $21,000 toward his school loans, more than $5,000 for cowboy boots, and nearly $5,000 to register for a dating service. The SEC’s investigation was conducted by Lucee Kirka, Peter Del Greco, and Marc Blau and the litigation will be led by Spencer Bendell of the Los Angeles Regional Office. Judge King has scheduled a court hearing for Sept. 15, 2011, on the SEC’s motion for a preliminary injunction.”